Variable costs related to sales equal 70% of the selling price and the company has fixed...

 

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Variable costs related to sales equal 70% of the selling price and the company has fixed expenses estimated at R400 000 every month. The company had a cash balance of R200 000 at the end of May 2020. The company uses a R20 000 000 revolving credit facility to finance cash shortfalls, which costs 1% per month and on which interest is paid, in cash, on the opening balance every month. Required: Compile a cash budget for Flour Pty (Ltd) for June to August 2022. Flour Pty (Ltd) is currently planning its cash requirements for the next quarter, June 2022 to August 2022. The company sells baking supplies on credit, leading to a constant flow of sales and payments from debtors, with occasional large inflows when goods are supplied for large contracts. The ageing report on the accounting system of the company gives the following breakdown of collection from debtors: 20% one month after the sales have taken place 80% two months after the sales have taken place The sales recorded for both April and May were R400 000, respectively. Sales are expected to remain unchanged until at least August 2020. Further to this, e-mails from other branches and sales personnel indicate that the company can expect payments from large contracts worth R100 000 in June, R30 000 in July and R200 000 in August. Variable costs related to sales equal 70% of the selling price and the company has fixed expenses estimated at R400 000 every month. The company had a cash balance of R200 000 at the end of May 2020. The company uses a R20 000 000 revolving credit facility to finance cash shortfalls, which costs 1% per month and on which interest is paid, in cash, on the opening balance every month. Required: Compile a cash budget for Flour Pty (Ltd) for June to August 2022. Flour Pty (Ltd) is currently planning its cash requirements for the next quarter, June 2022 to August 2022. The company sells baking supplies on credit, leading to a constant flow of sales and payments from debtors, with occasional large inflows when goods are supplied for large contracts. The ageing report on the accounting system of the company gives the following breakdown of collection from debtors: 20% one month after the sales have taken place 80% two months after the sales have taken place The sales recorded for both April and May were R400 000, respectively. Sales are expected to remain unchanged until at least August 2020. Further to this, e-mails from other branches and sales personnel indicate that the company can expect payments from large contracts worth R100 000 in June, R30 000 in July and R200 000 in August.

Answer rating: 100% (QA)

To determine the cash requirements for the next quarter June 2022 to August 2022 for Flour Pty Ltd w... View the full answer